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Scenario: Company A is a design agent and owns a vessel design (Company A's Intellectual Property) that has not been built and that Company B is interested in proposing as it's solution for an anticipated DoD opportunity as a prospective prime contractor. Company A has no patent, and has not filed for a patent for said vessel design, but is requiring Company B to enter into a license agreement including royalty payments to use Company A's vessel design based on a percentage of the price for each vessel constructed and sold to the Government. I am assuming the contract, or CLINs, under which the vessels will be constructed will be fixed price incentive, which may have some bearing on what clauses and provisions may be included in the solicitation concerning. It is my understanding that license agreements with royalty payment terms for the use of a design that has no design patent do exist, but it is not clear to me if the Government would deem such royalty payments to be proper and deem the associated costs to the prime contractor to be allowable if there is no patent. FAR 31.205-37 seems to only address royalties in the context of when there is a patent. FAR 27.202 mostly refers royalties in the context of when there is a patent. So the question is, would the royalties paid to Company A by Company B be deemed proper and the costs deemed allowable despite there being no patent for the vessel design?
I had a question presented to me about Intellectual Property and appropriate marking of data under a government contract. Specifically, the since the FAR/DFARS outlines in detail markings for limited, government purpose, and special license rights but is otherwise silent on unlimited rights markings. The work related to this drawing was properly segregated and identified as being produced solely with government funds for the first time under the government contract. The person asking the question assumed this meant government ownership of the drawing with a license to my Company. Protocol at my company is to mark our developed drawings with the “XYZ Company propriety” statement which may pose a conflict. My quick response was no, we can’t include the “proprietary” statement on the drawings. The DFARS defines the acceptable markings. There are no “unlimited rights” marking requirements for IP submitted to the U.S. Government. Another Contracts Administrator more senior was also consulted however, and told them that we can and should include our proprietary marking. I believe we should only mark with a distribution statement as defined by the customer, an ITAR statement and a maybe copyright notice. Please advise as to whether or not I'm misinterpreting the DFARS/FAR on marking of IP. In my response to the person posing the question I also offered the following : Although this drawing is developed under the government contract with government funds, unless specifically requested in the contract, ownership remains with our company but the government has unlimited rights. This gives the government (and our company) the right to use, disclose, reproduce, prepare derivative works, distribute copies to the public, publicly perform and display the material in any manner and for any purpose it desires (ITAR limitations would apply). With regards to My Company’s proprietary marking, the “XYZ proprietary" would be nonconforming as 252.227-7013(f) states what markings are permitted – “proprietary” not being one of them for documents delivered to the customer. We would still be able to use this marking on the document otherwise. There are no required markings in instances where the government has unlimited rights. The purpose of the markings are to clarify the government’s rights. Any unmarked deliverable will be presumed unlimited. Although Unlimited rights gives the government the right disclose and distribute, those rights don’t automatically imply that the government WILL disclose or distribute. In this case a Copyright may offer, and our company may want to consider some level of protection against those who illegally obtain the IP. DoD generally allows the contractor to own the copyright for original works created under a DoD contract (DFARS 227.7103-9, DFARS 252.227-7013-4). In such cases, the government obtains a nonexclusive, royalty-free license to use the copyrighted material in perpetuity. NOTE: This license allows any government agency (not just the original contracting agency) to use the copyrighted material. Copyright markings, are allowed in accordance with this same paragraph as prescribed under 17 U.S.C. 401 or 402. We will need to request authorization for copyright in accordance with 52.227-14. Articles are not required to be marked or registered to be considered copyrighted. Should we decide to copyright the IP, we would need to include wording similar to this below/or other wording approved by our Legal department: ©2014 XYZ Company Inc. This work, authored by XYZ Company Inc, was funded in whole or in part by the U.S. Government under U.S. Government contract #xxxxxx, and is, therefore, subject to the following license: The Government is granted for itself and others acting on its behalf a paid-up, nonexclusive, irrevocable worldwide license in this work to reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, by or on behalf of the Government. All other rights are reserved by the copyright owner.